Sonic Hedgehog (Shh), the vertebrate relative of the Drosophila gene hedgehog (hh), is the secreted molecular signal which mediates a number of key inductive events during embryonic patterning. A systematic analysis of vertebrate relatives of other members of the Hh signal transduction pathway has revealed that Patched (Ptc) encodes a 12 transmembrane domain Shh receptor and that the zinc finder DNA binding factors encoded by Gli and Gli3 are intracellular members of the Shh signaling pathway related to the Drosophila gene Ci. Evidence from Drosophila has suggested that Ptc represses Hh target genes, such as decapentaplegic (dpp), wingless (wg) and Ptc, and that Hh serves to derepress these targets through a mechanism involving genetic interactions with Ci and a 7 transmembrane domain receptor, Smoothened (Smo). Because of the importance of Shh signaling during development it is of interest to investigate more thoroughly the molecular nature of the complex network of positive and negative interactions that respond to Shh stimulation. In this regard I propose a three leveled approach to examine Shh signaling at the membrane, in the cytoplasm and in the nucleus. Specifically I analyze the regulation of cellular partitioning of GLI in response to Shh stimulation, identify new members of the Shh signal transduction pathway based on their physical interactions with PTC and GLI, and investigate the regulatory roles of GLI and GLI3 on the Ptc promoter.